Abstract: Transformative political shifts, such as rising polarization, disillusionment with globalization, and the surge of radical parties, have been linked to the disappearance of manufacturing jobs in advanced economies. We argue that the political effects of deindustrialization are shaped by public policy responses. Leveraging the geographic and temporal variation in job losses and active labor market support within a single country, we employ a staggered difference-in-differences model to compare electoral outcomes over time in municipalities with and without mass layoffs, and with and without generous re-training and re-employment programs for displaced workers. We find that incumbents gain votes in areas where layoffs are paired with generous active labor market programs, while radical left parties typically lose votes. We provide evidence that these political effects are driven, in part, by local labor market dynamics.

Moderator: Maggie Peters